Gold Still Glitters

Gold can make pawnbrokers a lot of money when it’s going for top dollar. But it isn’t necessarily a tragedy when prices slide, say both consultants and successful pawnbrokers.

“When the price of metals started dropping, a lot of pawnbrokers started wringing their hands and gnashing their teeth,” says Steve Krupnik, president of Cloud Ten pawnbroking consultants and a former long-time pawnbroker.

“It was almost silly to me.”

Both Krupnik and Jerry Whitehead, CEO of Pawnshop Consulting Group, point out positive sides to the decline in gold prices — not least the return of many pawn businesses to a concentration on core metrics.

“We preach core business metrics, being very aggressive with loan balances,” Whitehead says firmly. Pawnbrokers needs to pay attention to the basics, he says, adding that during the gold boom many pawnbrokers strayed away from the pawn business.

Similarly, Krupnik tells his clients that the gold business can always be there and always be profitable: The key is to treat it as simply another of your key metrics.

Krupnik recalls his past experience with the gold cycle, when he was running a pawn business. “During the last metals boom, I made a lot of money when it went up. I made more when it went down,” he says.

The key is to keep marketing, but change its focus, Krupnik says. “People will act to prevent loss.” Advertise that they should sell their gold before the price drops further, he advises.

Less Competition

Both consultants agree that pawnbrokers are benefitting from the disappearance of the fly-by-night operators.

“Most pawnbrokers operating in the United States are still dealing in metals — it’s 30 percent to 60 percent of their overall loan business,” Whitehead points out. In contrast, “Gold buyers are packing up and going away.”

“Pawnbrokers should be jumping for joy because all their competitors are going out of business,” Krunik says. “All those ‘We Buy Gold’ stores — gone. All those hotel gold buyers — gone.”

Tim Birkle, who owns four Vista Pawn outlets in Idaho, says the fly-by-nights are gone from his areas. “One guy is still here, who was here before,” Birkle says. “The smaller places pretty much closed up.” Besides the slump in prices, Brikle says that crackdowns by the authorities helped: The fly-by-nights didn’t like having to follow the same regulations pawnbrokers face.

Keeping gold in perspective regardless of price has paid off for Birkle. While he admits that the volume is down from a year-and-a-half ago, Birkle still takes quite a bit of gold in.

“We still have our foot on the metal in marketing,” he says.

That approach is echoed by industry leader David Schoeneman, owner of Shane’s The Pawn Shop in Chicago Heights, Ill. “We advertise aggressively and consistently on TV,” he says. “It’s less now than a year ago, but people come.”

Keeping Customers

Birkle emphases that he doesn’t confuse making a quick buck on gold with losing a lot more by alienating long-time customers.

Yes, says Birkle, if gold takes a real dip, he might have some conversations with casual pawners. “But if someone has been bringing in the same chain every month for a couple of years, I’m just going to give them the same money as I always did.”

“That regular customer has no idea what that bracelet would melt for,” Krupnik points out. “If the customer has picked up the bracelet 15 times, there’s no reason she won’t pick it up the sixteenth time.